London has gradually become the centre of much of life in the UK. As the nation formed and transformed around it, London gradually accumulated more and more functions. The City of Westminster, the home of national governance, was named as a counterpart to the City of London, a centre of global trade and finance. It was home first to religion, then royalty, then politicians and civil servants. A legal cluster emerged to serve the two cities off the connecting “Strand”, joined later by a newspaper cluster on Fleet Street. More recently, modern London has acquired national sports stadiums, cultural venues, new business clusters and international tourist attractions.

London as capital

By the 19th century, London was not only the capital of England and the UK, but arguably the capital of Europe. Around 1840, it became the largest city the world had ever seen, at the centre of an empire that spanned the globe. Its numerous functions boosted its prosperity, and whilst it has risen and fallen in relation to its nation state, its dominant position in the UK economy and national life has never really been threatened.

Other prosperous countries have separate political capitals – Washington, D.C. or Berlin, for example – and financial capitals – New York or Frankfurt. But these nations tend to be federal states. London, at the heart of a heavily centralised UK, is more comparable to Paris or Tokyo.

Like the latter cities, however, London has suffered as well as benefited from this status. London’s value to the nation has been huge, but as we have seen, its success also brings challenges – the cost of living, congestion, pollution, and growing resentment from across the rest of the country. ⁸² The city is perceived by many as politically, economically and culturally dominant, with a gravitational pull that damages the rest of the country. Polling shows that Brits view the city as “expensive”, “crowded” and inaccessible; Londoners as “arrogant” and “insular”. British pride in the UK’s capital diminishes according to geographical distance from it, and appears to be falling over time. ⁸³ And in recent times, London’s perceived dominance has become a prominent national political issue once more.

Economy

As at the start of the 20th century, the first decades of the 21st have seen London’s economy race ahead of the rest of the country. ⁸⁴ London’s success brings national benefits. The “Wider South East”, consisting of Greater London and the economically related East of England and South East regions, are the only parts of the UK that pay more in taxation than they receive in public spending. The majority of this comes from within London itself, as Figure 12 illustrates. London and the South East alone raise over a third of all UK tax revenue, ⁸⁵ and London’s success helps to fund the rest of the country.

London derives much of its wealth from its “world city” functions: in this regard, it competes with other world cities, not UK cities or regions (see Chapter 6 for more on this). There is also a great deal of interdependence with the rest of UK due to supply chains, inter-regional trade, ⁸⁶ and “spin-off” investments elsewhere in the country that arise from an initial investment in London. ⁸⁷ The economic benefits of London’s role within the UK therefore extend beyond its sizeable fiscal contribution to the Exchequer.

However, there are two important caveats. First, whilst London “pays in” considerably more than it receives from the public purse, both figures are high. London gets the third-highest share of overall public expenditure of any UK region, as Figures 13 and 14 show. HM Treasury may receive a better return on investment in the capital than anywhere else – but London’s highly visible and expensive new infrastructure, from Crossrail to the Olympic Park, also breeds resentment.

Second, it is crucial to remember that while Greater London as a “region” generates huge tax revenues, this is highly concentrated in just a few postcodes. Public investment in the Greater London region is often focused on facilitating economic activity – investment in public transport, for example – rather than on assisting its deprived communities. As we have seen, prosperity for many, and extreme wealth for some, too often obscures widespread poverty.

One final factor further complicates this picture. Whilst London receives a sizeable share of public expenditure in return for its (much larger) tax take, its citywide government has little say over how this is spent. Table 3 demonstrates how reliant London is on central government grant (“intergovernmental transfers”) compared to its international competitors – a consequence of London government’s limited tax-raising powers.

Culture

The concentration of national functions in London, and the strength of the capital’s economy, can also lead to the sense that it has undue influence over political, economic and cultural decision making. 60 per cent of Brits think that London gets more than its fair share of public spending. ⁸⁸ And in 2014, just over 60 per cent said that the location of Westminster and Whitehall meant political decisions were too focused on London. ⁸⁹

Of London’s many national roles, being home to parliament and national government is the one that most often springs to mind for British people. ⁹⁰ Repeated usage of “London” to mean “central government” in the national media reinforces this sense that the capital and UK national decision making are synonymous. ⁹¹

That the capital is home to so many institutions of national significance can lead to a feeling that a London “elite” not only makes all the political decisions, but also shapes national culture with values that are not necessarily shared by the rest of the country. Many national cultural attractions and organisations are based in the capital – and national media are also perceived to be London-centric, with an implicit focus on the city that flows from the overwhelming and longstanding concentration of national media outlets in London. ⁸⁹

The 2016 EU Referendum – in which London, Northern Ireland and Scotland were the only parts of the UK that voted to Remain – has fuelled the argument that London is culturally “different” to the rest of the country. So too has the fact that Londoners are notably more likely to vote for the Labour party than voters in the rest of England – a phenomenon observable over decades, but increasing in recent years. ⁹³ Nevertheless, Londoners have so far elected the Labour party candidate to the modern mayoralty only twice in five elections. ⁹⁴

London’s national role also makes it the centre of significant moments of both national celebration and protest. It can seem that living in (or travelling to) London is essential to having one’s voice heard.

One potential solution to the perceived London-centrism of the UK could be moving some, or elements, of the UK’s national institutions out of the capital. The majority of British civil servants are already based outside the capital, but London still remains the region with the largest number of civil servants in the UK. Overt policy in this direction has led to significant numbers of civil service and public service broadcast jobs being moved out of the capital, ⁹⁵ and there are plans to move more. ⁹⁶

Nonetheless, polling by Centre for London in 2019 suggested that there was surprisingly little appetite amongst the British public for moving national institutions out of the capital to make Britain “fairer”. ⁹⁷ Devolution of power may be a more effective solution to the challenge of over-centralisation, and recent decades have seen large transfers of power to the “devolved nations”, London, and other “city-regions” such as Greater Manchester. To date, however, devolution to London has been limited by international standards, and appears to have stalled. ⁹⁸

Where next?

The UK has a long history of “regional policy” that has attempted to address the capital’s dominance – whether by incentivising growth and investment elsewhere or discouraging development in London. Following the 2008 crash, anti-London rhetoric seems to have become an increasing part of the national political debate. The idea gained traction that an out-of-touch “liberal metropolitan elite” ⁹⁹ or, slightly later, “Islingtonian Remainers” ¹⁰⁰ were in charge of the country. London’s multicultural population and highly globalised economy do not sit easily alongside nationalist or populist ideas.

Alongside the political arguments about London’s “elite”, there is also an economic reality. Across the UK, people are not feeling the benefit of the London region’s economic might: whilst over three-quarters of Brits feel that London contributes “a lot” or “a fair amount” to the UK economy, just 16 per cent feel it contributes to their local economy. This “perception gap” has grown over the last five years. ¹⁰¹ In other words, at a time when London’s economic contribution to the nation’s finances is growing year on year, fewer and fewer people across the country feel this benefits them.

The aim of regionally “levelling up” the national economy may be a laudable one – and could help London too. But the way many commentators talk about London – often treating it as a homogenous, rich region – is inaccurate. When the current Prime Minister’s chief adviser told representatives of the national media, “You guys should get out of London. Go and talk to people who are not rich Remainers”, ¹⁰² he perhaps forgot London’s high poverty rate, and that it is home to 1.5 million Leave voters (twice as many as the North East). In reality, the vast majority of Londoners have no more influence over national decision making than their counterparts elsewhere in the UK.

This over-simplification can lead to less-affluent Londoners being neglected in the national discourse and in policymaking, actively harming the capital. London has borne a disproportionate 30 per cent of all government cuts over a decade of austerity. ¹⁰³ The Stronger Towns Fund, announced to help “left-behind areas”, excluded the capital’s less affluent neighbourhoods entirely. ¹⁰⁴ It appears that the recipients of these funds were not all chosen on strict economic criteria. ¹⁰⁵

Arguments over whether the capital gets more than its fair share of transport investment have surely played a part in London being expected to finance more and more of its own infrastructure. Transport for London has become “the only transport authority in the Western world” to receive no central government grant towards its operating costs – a situation that has left it critically exposed during the current pandemic. ¹⁰⁶

Investment across the towns, cities and regions of the UK is welcome: yet if it comes at the expense of growth-generating investment in the capital, the nation may have to find an alternative means of financing its public services. With central London’s agglomeration-driven economy coming to a standstill with the advent of COVID-19, “levelling down” rather than up threatens to be an unintended outcome of the current situation.

In thinking about the future of London – and its relation to the UK as a whole – Londoners and policymakers might consider the following questions:

• Is there a London “problem” in UK politics? If so, what is the solution?
• How could the “levelling up” agenda be used to tackle London’s challenges?
• What other issues are there in London’s relationship with the UK?
• What might be the implications for London of constitutional changes to the rest of the UK – for example, Scottish independence?
• What could London learn, or emulate, from other parts of the UK?